The following transactions apply to Ozark Sales for Year 1:

The business was started when the company received $49,000 from the issue of common stock.

Purchased equipment inventory of $176,000 on account. Sold equipment for $203,500 cash (not including sales tax).

Sales tax of 7 percent is collected when the merchandise is sold.

The merchandise had a cost of $128,500.

Provided a six-month warranty on the equipment sold.

Based on industry estimates, the warranty claims would amount to 4 percent of sales.

Paid the sales tax to the state agency on $153,500 of the sales.

On September 1, Year 1, borrowed $21,000 from the local bank.

The note had a 6 percent interest rate and matured on March 1, Year 2. Paid $5,600 for warranty repairs during the year.

Paid operating expenses of $53,500 for the year.

Paid $126,000 of accounts payable.

Recorded accrued interest on the note issued in transaction no. 6.

a. Show the effects of these transactions on the financial statements using a horizontal statements model. (Use a + to indicate increase or a for decrease. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Columns for events that have no effect on any of the elements should be left blank.) (Note: Not all cells will require an input.)

Effect of Transactions on Financial Statements Balance Sheet Income Statement Statement of Cash Flows Event Assets = Liabilities + Equity Revenue Expenses = Net Income 1. + = + + - 11 = + FA 2. = = + + 3a. 3b. = + = 4. = + + = 5. = + = 6. + 7. = = 8. + + + + 9. 10